7 Ways to Avoid Getting Screwed Over on a Lease Purchase Agreement

In order to get started as an owner operator, the first step is to buy your own truck. However, that’s easier said than done. A lot of times, dealerships won’t offer financing – even if you have perfect credit. That means you can’t get a loan on a truck, so your only option is to pay cash for it.

Do you have $50,000+ in cash sitting around? Not many do.

That’s why many drivers turn to their trucking company for a lease-purchase opportunity. You’re still an owner operator – you’re just leasing your truck until you complete the payments and it’s yours.

I’ve structured the lease purchase contract here at Freight X, and I’ve done enough of these deals to hear about what other companies are doing.

It seems to me that many trucking companies are ripping off truckers who don’t understand some of the contract details. That leaves a lot of truckers with a bad taste in their mouth, and just hearing the words “lease purchase program” turns them off.

In order to save you from getting burned by a bad lease-purchase agreement, I’ve come up with 7 of the most common things you should avoid in a lease-purchase contract.

Of course, we’d love to strike a deal with you if you’re looking to become an owner operator, but no matter who you go with, I want to make sure you’re not getting screwed over.

Interested in owning your own truck? Learn more about lease purchasing at Freight X →

1. Run away from balloon payments at the end of the contract.

Some lease purchase agreements have what’s called a balloon payment that’s due at the end of the contract period. This recently happened with a driver who came to us in the middle of their lease-purchase contract with another company.

He was paying around $600 per week for nearly 5 years, and the final balloon payment was $50,000 at the end. That makes absolutely no sense – that truck isn’t even worth $50,000! Luckily, his maintenance account had $25,000 in it, and they let him use that balance towards the balloon payment. He came up with the other $25,000.

Most people aren’t in his position and wouldn’t be able to afford that. If that were the case, the company would send you into another lease, and it just goes on and on. You’d never end up actually owning a truck!

At Freight X, we have no balloon payment. If the company you’re talking to has a balloon payment, it better be something reasonable that you think you could come up with.

2. Make sure the maintenance account doesn’t have too many restrictions.

What’s the maintenance account going to look like? We hold between 12-20 cents per loaded mile and put it into a maintenance account for you. It’s your money, but we hold it there until the lease agreement is over so that you have money available to make necessary repairs.

And that makes a lot of sense. Think about that ­– if I was driving your car, you’d want to hold something back to fix it. For example, in a worst-case scenario, you could walk away from it or the car could break down and you may not have the money saved to fix it.

Once you own your truck, it’s entirely up to you whether you want to keep the maintenance account going or not. Smart owner operators still do a maintenance account because they know they won’t save that money on their own. They save 10-12 cents per mile until there’s a good chunk in there, and then we’ll pause it for some time until it’s needed again.

You may not have a credit card or the cash to fix an issue in the middle of the night if you break down, so that maintenance account is a little insurance for you. I encourage it, but it’s not mandatory once you own your truck.

So, when you’re in your lease-purchase agreement, I let you use that maintenance money for any repairs on the truck – other places have way more restrictions on that.

For example, here are some questions you want to ask about the maintenance account while you’re in the lease purchase contract:

• Am I allowed to use the money in the maintenance account to pay off the balance of my truck?
• Once I pay off the truck, is it mandatory to have a maintenance account or is it my choice?
• Do I have to get maintenance done at the company shop, or can I get it done anywhere I want to?

Some guys say, “What if my maintenance account gets too big?”

I say it can’t get too big, because if you end up with more money in your account then you owe me for the truck, we just sign the truck over and it’s yours.

3. Make sure you have the freedom to go to any shop to get maintenance done.

At Freight X, you don’t have to get your truck maintenance done at our shop. However, it can be advantageous to you to do so, and here’s why.

If you take your truck to an outside shop, their goal is to make sure they charge you for everything you may possibly need. Their job is to make money fixing your truck.

At our shop, our job is to get you back on the road as quickly as possible and for as little money as possible. It doesn’t mean we sacrifice quality or safety – things that are necessary have to be done ­– but our goals are aligned.

In a dealership, they’ll go, “Well, it’s not re-genning, so you’ll need a new DPF filter, a DOC, possibly your doser isn’t working… and then we’ll need to run it through a re-gen to see if that fixes your problem.”

That right there is an $8,000-$10,000 bill.

We would attempt to run it through a re-gen and see if there were any codes that came up during that process. We’d investigate those codes, and try to determine what the actual source of the issue is. It could be a wiring issue, a sensor not reading correctly… it could be a simple $1 fix. Either way, we’ll solve the root of the problem.

In defense of the dealerships, they’re going to throw parts at the problem hoping that they’ve hit the real problem with one of them. They don’t want you to come back to their shop and have them rework something because it isn’t fixed. I can’t say that’s totally true, but that’s what I’d say in defense of them. Maybe they aren’t all crooked, so that’s a possible explanation.

In any case, if you come to our shop, we have your best interest in mind, and we also charge a lot less per hour than outside dealerships. We charge $80 per hour whereas outside dealerships charge anywhere from $110-$130 per hour.

No mechanics are perfect. We all know that. Sometimes, you just don’t know. Your truck acts funky on the road, but when you bring it in, it stops acting funky. It just happens. But we have a higher success rate than outside dealerships – that’s for certain.

Another thing to take into consideration is that we’re just easier to work with. Here’s an example.

I had a truck the other day where the blend door wasn’t operating correctly. We tested the controller and found that it was likely the problem. We replaced it, and it didn’t fix the problem. Turns out it was the blend door actuator, which was a much more expensive fix. I didn’t charge the owner operator for the controller in that scenario.

I’ll stand behind that and say, “Well, we tried to fix the cheaper thing first and it didn’t work.” An outside dealership would charge you for both.

In any case, if our shop was terrible, I would want the option to go somewhere else. So that’s the case in our lease purchase agreement. I think our shop is awesome, but you do have the freedom to go anywhere you want.

You don’t want to be limited to the company’s shop, especially if it’s not great.

4. Ask if you’re allowed to pay the truck off early.

Are you allowed to pay the truck off early? We have a clause in our contract where after half the payments, you’re more than welcome to pay the truck off early.

Other places require you to stay with them the whole time.

Paying off your truck early allows you to save on interest.

Additionally, if the company’s not treating you fairly, not giving you loads, or not keeping you working, you might want to pay off the truck and go somewhere else.

If I was an owner operator, I’d be asking a ton of questions and would be a bit apprehensive because of how many drivers have come into my office with a bad history of lease purchase programs. They come in and say either they’ve had a terrible experience, or a friend has.

The general consensus is that whenever you get close to paying off your truck, they stop giving you loads. We obviously don’t do that, but some places do.

I’m not in the business of leasing trucks. I’m in the business of running freight. I have 3 choices when it comes to a truck – I can sell it, trade it in, or lease it to someone and give them a start at their own business. It makes me feel good to play a part in that and have a new business partner. So why would I stop running freight when that’s my primary goal here?

At the end of the day, you don’t want to be stuck in a situation where you’re stuck not making money, so just make sure you have the option to pay it off early.

5. Don’t go for really long leases.

Like I mentioned before, one of our drivers came to us from another company on a 5-year lease. In my opinion, that’s just too long to be leasing a truck. You want to actually own it at some point!

We structure our lease-purchase contracts to be between 2-3.5 years long depending on what you want your weekly payment to be.

A typical weekly payment is $400-$500 per week, which just depends on the value of the truck. However, we can play around with the length of the contract to get that payment where it needs to be for you.

Some drivers like a higher payment so that they can be done with it sooner, while others prefer a lower payment to help with cashflow. We’re flexible and are proud of it!

6. Some companies pay you a smaller percentage if you’re leasing a truck.

I’ve heard that a lot of companies pay a smaller percentage of the load to a lease-purchase driver versus an owner operator. We don’t feel that’s right.

You’re doing the same amount of work, you have the same maintenance, the same costs… we pay lease-purchase drivers the same percentage we pay owner operators. The only difference is you have a truck payment to make.

7. Don’t overpay for the truck!

This may sound obvious, but I see it all the time and it’s absolutely shocking to me: the purchase price of the truck ought to closely match the market value of the truck.

I’ve seen a driver sign a lease agreement for a 2013 Freightliner for $120,000. It should’ve been $50,000-$60,000.

Obviously, the price will depend on the condition, the mileage, is it automatic or standard, does it have an APU… but anything that’s exorbitantly high like that is a bad deal!

Let’s put it this way: a stripped down 2019, brand new, 0 miles… you could buy that for $120,000, you know?

We are extremely reasonable. For example, we just bought a truck for $72,000 and lease purchased it for $72,000. Apparently, that’s unheard of, but not here at Freight X.

And don’t forget that there’s no credit check – we just give you the keys, you sign the lease agreement, and you start driving. A dealership isn’t going to do that.

At the end of the day, our goal at Freight X is to be business partners with you. That’s why we are so fair and transparent with our lease purchase agreements, and we want to ensure you’re as successful as you can be.

Thanks for reading, and be sure to leave a comment below if you have any experience lease-purchasing trucks!